The 2018 Form 2 includes a new schedule for calculating the Elderly Homeowner Renter Credit.
When determining gross household income, the claimant reports information from the Montana Forms 2 and the federal 1040 Forms of all the members of the household.
We have received some comments about line 3 of this calculation pertaining to the add-back of pensions and Social Security benefits being left out of the Federal Adjusted Gross Income (FAGI). It appears that the instructions for this line do not cover all the possibilities for federal Form 1040, line 4a.
The following are alternative instructions for line 3 that can be used to solve that problem:
On line 3, enter the sum of the following two amounts:
- Amount 1: Reduce Form 2, line 4a, by any after-tax contributions or any rolled-over tax-free distribution that you included on that line. If what remains is more than the amount on line 4b, subtract line 4b. Otherwise, Amount 1 is zero.
- Amount 2: Subtract Form 2, line 5b, from Form 2, line 5a.
Important additional notes:
- Any part of a pension received by a household member not reported on line 3 can be reported on line 7 of the Elderly Homeowner/Renter Schedule.
- Qualified charitable deductions (QCD) from IRAs constitute non-taxable income and must be included in gross household income. QCDs must be reported on line 4a of the tax return. Our formula does not always capture the entire amount of QCD, so any remaining amount not added back to line 3 would have to be included on line 7.
Taxpayers who already filed do not have to file an amended return; the department will make the necessary corrections. We thank the tax preparers’ community for bringing this issue to our attention.